How Cloudy is the Future?

1. How Cloudy is the Future? HostingConKeyNote 19 July 2010 Lydia Leong Research Director Internet Infrastructure and Emerging Enterprise Services

2. What is the Future of Hosting? • What is cloud computing, really? • What will the cloud mean, not just for the future of infrastructure but for the future of IT and the way that businesses and consumers use IT? • How will different segments of the hosting market evolve over the next five years?

3. Cloud Computing:Multiple Perspectives, Multiple Origins Focus on "the Cloud" Focus on "Computing" Data Center Pressures Web 2.0 and Mashups Cloud Subsidized Applications Virtualization Services and Web API/Arch. Web Googleplex Grid Internet Web Platforms Information and Browser UI Real-Time Infrastructure Global-Class Consumer Applications Connectivity Management Discipline 1980 1990 2000 2010 2020 Utility Models SaaS From the Enterprise From the Web

4. The Changing Seller / Buyer Relationship "All that matters is results. I don't care how it's done." "I want accessibility from anywhere, from any device." Access ModelInternet Acquisition Model Service "It's about economies of scale with effective and dynamic sharing." "I don't want to own assets; I want to pay for elastic use, like a utility." Technical ModelScalable, elastic, sharable Business Model Pay for use The Seller The Buyer Cloud computing promotes a provider-consumer relationship over a vendor-user relationship. Sell tech to: Vendors Users Implement tech bought from: Sell service to: Providers Consumers Consume service from:

5. Services are delivered through use of Internet Identifiers, Formats, and Protocols. Services are tracked with usage metrics to enable multiple payment models. Services share a pool of resources to build economies of scale. Services scale on-demand to add or remove resources as needed. Consumer concerns are abstracted from provider concerns through service interfaces 2 1 3 5 4 Shared Internet Technologies Metered By Use Scalable & Elastic Service Based What is Cloud Computing? Gartner defines cloud computing as "a style of computing where scalable and elastic IT-related capabilities are provided 'as a service' to customers using Internet Technologies“. 5 Attributes that support outcomes

6. The Spectrum of Private to PublicCloud Services Web search Shared data/grid service Dedicated SaaS instances Public Cloud Cloud Provider Business partner cloud services Consortia-owned service Targeted industry service OutsourcedPrivate Cloud Private Cloud Internal dev/test service Exclusive provider (IT spinoff) Virtual private cloud Third Party Users Public Cloud Services Anyone ACCESS Exclusive Private Cloud Services OWNERSHIP/ CONTROL

7. Slicing the Cloud V-Cloud PaaS SaaS Business Services Information Services Application Services Mgmt. and Security App. Infrastructure Services IaaS Cloud Enablers System Infrastructure Services

8. Same Old IT…New Abstractions, Delivered as a Service Process Process Information / Data Information / Data Application Application Middleware Application Infrastructure Operating System System Infrastructure Hardware Data Center Facilities

9. Business Wants the Promise of Cloud • Hype leads to unrealistic expectations • Internal IT is often slow to respond • The real cost of IT is often poorly understood • The problem is often process, not technology!

10. What workloads and applications are suitable to cloud environments? Contracts (or lack thereof), service-level agreements, vendor relationships. Standards, portability, interoperability, vendor lock-in, public/private hybrids. Cloud services introduce new security issues. Perception (and reality) of risk. 5 4 2 3 Security / Compliance Suitability for Needs Vendor Management Interoperability The Cloud Challenges IT Organizations Adoption of the cloud computing model, and associated services, whether public or private, requires a culture shift within IT organizations. Typical outsourcing concerns apply to external cloud services. 1 Ownership / Control The Concerns of IT Managers

11. What Does the Cloud Do To Hosting? • Alters the way that IT is consumed, and therefore buyer needs, desires, and expectations • Transforms all segments of the market • Creates new use cases and new opportunities • Destroys legacy models Hosters Change or Die 10

12. Hosting Market Segmentation • Shared (Mass-Market) Hosting • Virtual hosting, traditional VPS • Colocation • Small and large-footprint • Self-Managed Hosting • “Server rental” • Simple Managed Hosting • Managed through the OS layer; typically 1 or 2 servers • Complex Managed Hosting • Managed up to the application; typically 4+ servers • Segmentation is delivery-platform agnostic (don’t care whether it’s dedicated or virtualized) Application Middleware Operating System Hardware Data Center Facilities

13. Mass-Market Hosting: Buying Trends • Focus on the business value of the technology • SOHOswill increasingly adopt SaaS • Local integrators developing for the SOHO market will increasingly move to PaaS • Specific platform hosting (such as Wordpress) will remain popular, but this borders on being SaaS / PaaS, not IaaS • Social media will continue to be increasingly influential in tech-savvy buyer decisions • Market share will continue towards shift to hosters who have brands and “pull through”

14. What Happens to Mass-Market Hosting? • Users desire ease of use, control panels, and other things – no need for technical knowledge • Relatively minimal impact in shared hosting, from the “typical” cloud IaaS products • Cloud IaaS destroys the traditional VPS market • Moderate impact from PaaS, increasing rapidly over time, and affected by market alliances • Users buy SaaS and implicitly buy into SaaS ecosystems

15. Colocation: Buying Trends • Capital-constrained businesses are favoring colocation and leasing over data center builds • Large-footprint colocation and data center leasing are the drivers of the most growth – not retail colocation • Increasingly a local / regional business • No supply/demand imbalance in the largest metropolitan markets • The broader trend is towards lower-quality, less expensive space (more Tier II than Tier III) • Power densities are continuing to increase

16. What Happens to Colocation? • The colocation business is not destroyed by… • More powerful servers • Virtualization • The cloud • But… • Footprints will become denser • Servers will be more efficiently utilized • A greater percentage of the IT infrastructure will be owned by service providers, not end-user customers

17. Self-Managed Hosting: Buying Trends • SMBs: Developers / the DevOps movement • Enterprises: Virtual data centers • New use cases • “High-performance” computing • Batch computing • General IT infrastructure • Fastest-growing segment of the market

18. What Happens to Self-Managed Hosting? • Dedicated servers don’t go away • But virtualized servers predominate • Significant broadening of the market • Commoditization • Strong price-sensitivity from buyers • Margin compression • Automation of management features

19. Simple Managed Hosting: Buying Trends • Significant negative impact from the economy • SMB segment is harder hit by the downturn • Save money through self-management • Pricing pressure • Shift to cloud IaaS • Management services are still important • Larger deals are becoming more commonplace

20. What Happens to Simple Managed Hosting? • Automation becomes king • Many basic management tasks can be automated • Drives down costs, improves service quality • Blurs the line between self- and simple managed • Potential collision with PaaS • Market consolidation? • Leverage scale for cost-efficiency • Build more powerful brands • People still matter

21. Complex Managed Hosting: Buying Trends • Has held up well despite the economy • Virtualization is part of most deals • Less price-sensitive • Most deal wins based on “comfort level” • Buyer is increasingly savvy • Does research online • Business decision-maker • Technical evaluator • People-centric business

22. What Happens to Complex Managed Hosting? • Convergence with data center outsourcing • Driven by the universality of cloud-style IaaS • More tactical than DCO • Hybrid environments are and will be the norm • Universal flexible, on-demand provisioning • Automation will take place at the lower levels • Customers will be pushed towards standardized solutions in order to obtain cost savings • Customization will still require people

23. Who are You? • The classic hosting business dilemma: assets, technology, or people? • Are you a software company? • Hosters are traditionally integrators of technology, not developers of technology • The lack of true turnkey cloud solutions is pushing hosters into doing more development • But turnkey solutions will emerge • How are you going to compete with software companies? • Microsoft, Google, VMware…

24. Gartner Research Lydia Leong, Research Director Internet Infrastructure and Emerging Enterprise Services lydia.leong@gartner.com